The settlement of S P Setia Bhd's Australian project, Sapphire by the Garden, which has a gross development value (GDV) of RM1.1 billion, may help the company reach its pre-sales target of RM4 billion this year.
KAF Research believes that the company will be able to create much greater sales in the fourth quarter of 2022 (4Q22), powered by the Australian project, despite sales coming in slightly short at RM2.7 billion as of the first nine months of 2022 (9M22).
Homebuyers received Sapphire by the Garden in October 2022.
"Profit from this project will be fully recognised in the 4Q22. In addition, bookings received in 3Q22 stand at RM592 million of which the management is focusing on the swift conversion of these bookings into sales. Overall, the management anticipates stronger sales next quarter and is confident that they will achieve its sales target of RM4 billion for the year," the research firm said in a note today.
Sales for the company in 9M22 came from the central region (63 per cent), the southern region (17 per cent), and the northern region (seven per cent). Its international projects accounted for 13 per cent of total sales.
According to KAF, S P Setia has a sizable remaining land bank with a GDV of RM147.7 billion.
The company opined that S P Setia's near-term prospects are still difficult because of the labour scarcity, which would delay product launches, as well as the falling ringgit, tightening monetary policy, and supply-demand imbalance that would continue to dampen investor confidence.
However, the management (S P Setia) is hopeful that the newly elected government will prioritise resolving the labour shortage issue.
KAF maintains a Hold recommendation with a reduced target price of RM0.55 (from RM0.98) based on a greater discount of 83 per cent to the RNAV of RM3.23
"We do not foresee any major catalyst in the near-term that could lead to the stock re-rating," it said.
SP Setia's nine months net profit grew by 81 per cent year-on-year to RM252 million (core earnings of RM92 million after RCPS distribution).
"The earnings were broadly in line with our and market expectations, making up c.52 per cent (consensus: c.32 per cent) of our year-end earnings forecast. We expect a stronger earnings contribution in 4Q22 from the settlement of its Australia's projects, mainly from Sapphire by the Garden project," it said.